Question

Which of the following statements about the impact of leases on the statement of cash flows are true?

a. The lessee reports cash payments for operating leases as cash flows from operating activities.
b. The lessor reports cash payments for operating leases as cash flows from operating activities.
c. The lessee reports cash payments for finance leases as cash flows from financing activities.
d. The lessor reports cash receipts from a sales-type lease as cash inflows from operating activities. .

Answer 1

The lessee reports cash payments for operating leases as cash flows from operating activities. The lessee reports cash payments for finance leases as cash flows from financing activities. The lessor reports cash receipts from a sales-type lease as cash inflows from operating activities.

Step-by-step explanation:

The correct statements about the impact of leases on the statement of cash flows are:

1. The lessee reports cash payments for operating leases as cash flows from operating activities. This is because operating leases are considered operating expenses and are included in the calculation of net income.
2. The lessee reports cash payments for finance leases as cash flows from financing activities. This is because finance leases are considered a form of financing and are treated as a liability on the balance sheet.
3. The lessor reports cash receipts from a sales-type lease as cash inflows from operating activities. This is because a sales-type lease involves the transfer of ownership and is treated as a sale, resulting in cash inflows from the transaction.